Managing Dispersed Knowledge: Organizational Problems,Managerial Strategies,and Their Effectiveness

While there has been much progress in understanding organizational knowledge and knowledge management practices, some questions still remain unresolved. This paper argues that at least one important driver of knowledge‐related organizational problems has been rather neglected so far: that is, the dispersed nature of organizational knowledge. The paper analyses the organizational problems and managerial responses arising from dispersed knowledge. It identifies three drivers by which the dispersedness of knowledge leads to management problems: namely, it creates large numbers, asymmetries, and uncertainty. A number of managerial strategies for dealing with the different components of the problems created by the dispersedness of knowledge are identified and their effectiveness analysed, thereby informing managers as to how best to deal with dispersed knowledge. The analysis of uncertainty‐related implications of dispersed knowledge uncovers an overlooked distinction that is helpful for understanding dispersed knowledge and its managerial implications. This is the distinction between uncertainty and ambiguity, i.e. a strong form of uncertainty that cannot be remedied by the standard strategy of increasing the information available.     

THE INTRADAY INTERDEPENDENCE STRUCTURE BETWEEN U.S. AND JAPANESE EQUITY MARKETS

Contrary to the efficient market hypothesis, previous research documents a significant correlation between lagged U.S. close-to-close stock market returns and current open-to-close Japanese equity market returns. We find that the significant correlation is limited to the first hour of Japanese trading, with subsequent hourly returns independent of lagged U.S. returns. This evidence suggests that the documented significant correlation is attributable to a sticky Japanese opening value associated with the use of nonsynchronous index data.     

The derived demand for faculty research

Estimation of the demands for many services supplied by government and charitable organizations are hampered by two practices common to the supply of these services. The suppliers often employ non‐price rationing of these services, and they price discriminate. The supply of college training, for example, is rationed on the basis of academic ability as well as willingness to pay, and more able students are typically quoted lower net prices (associated with scholarships) than less able students. This paper suggests a method for dealing with both practices in the analysis of cross‐sectional data. This methodology is used to investigate the question of why university faculty members are expected to do research as well as teach. One answer supported by our empirical work is that the customers (e.g., the students) demand it. Thus, controlling for price and non‐academic features, better students will choose to attend a university where more scholarly research is performed. Moreover, our empirical findings also support a strong negative link between faculty time devoted to teaching and the supply of research. Copyright © 2003 John Wiley & Sons, Ltd.     

"A players" or "A positions"? The strategic logic of workforce management

Companies simply can't afford to have "A players" in all positions. Rather, businesses need to adopt a portfolio approach to workforce management, systematically identifying their strategically important A positions, supporting B positions, and surplus C positions, then focusing disproportionate resources on making sure A players hold A positions. This is not as obvious as it may seem, because the three types of positions do not reflect corporate hierarchy, pay scales, or the level of difficulty in filling them. A positions are those that directly further company strategy and, less obviously, exhibit wide variation in the quality of the work done by the people who occupy them. Why variability? Because raising the average performance of individuals in these critical roles will pay huge dividends in corporate value. If a company like Nordstrom, for example, whose strategy depends on personalized service, were to improve the performance of its frontline sales associates, it could reap huge revenue benefits. B positions are those that support A positions or maintain company value. Inattention to them could represent a significant downside risk. (Think how damaging it would be to an airline, for example, if the quality of its pilots were to drop.) Yet investing in them to the same degree as A positions is ill-advised because B positions don't offer an upside potential. (Pilots are already highly trained, so channeling resources into improving their performance would probably not create much competitive advantage.) And C positions? Companies should consider outsourcing them--or eliminating them. We all know that effective business strategy requires differentiating a firm's products and services in ways that create value for customers. Accomplishing this requires a differentiated workforce strategy, as well.     

Modeling and measuring intraday overreaction of stock prices

We introduce a model for stock prices consisting of a fundamental price process and a news impact curve, which allows for either overreaction, underreaction, or correct response to changes of the fundamental value. We further develop statistics based on OHLC data, which separately measure upside and downside overreaction. The distribution of these statistics under the hypothesis of correct response and fundamental prices following Brownian motions is used to derive tests for upside and downside overreaction. We show that more realistic and frequently used fundamental price processes with correct response leave the distribution of the test statistics widely unaffected or lead to conservative tests. Empirical application to different stock markets provides strong evidence for intraday overreaction, particularly to bad news. The economic significance of the discrimination induced by the proposed statistics is further illustrated by analyzing the performance of a simple buy on bad news strategy.     

Time series momentum

We document significant “time series momentum” in equity index, currency, commodity, and bond futures for each of the 58 liquid instruments we consider. We find persistence in returns for one to 12 months that partially reverses over longer horizons, consistent with sentiment theories of initial under-reaction and delayed over-reaction. A diversified portfolio of time series momentum strategies across all asset classes delivers substantial abnormal returns with little exposure to standard asset pricing factors and performs best during extreme markets. Examining the trading activities of speculators and hedgers, we find that speculators profit from time series momentum at the expense of hedgers.     

IQ and Audit Quality: Do Smarter Auditors Deliver Better Audits?

This study examines the role of an individual auditor's cognitive ability in delivering high‐quality audits. Our results from analyzing archival data from Sweden show that audit partners' IQ scores obtained from psychological tests are positively associated with going‐concern audit reporting accuracy and audit fee premiums. We also find some, albeit weak, evidence that audit partners' IQ scores are negatively associated with the income‐increasing abnormal accruals of the client. These results suggest that, although audit services are standardized through various control mechanisms and audits are conducted by teams rather than by individual auditors, the cognitive ability of audit partners responsible for an audit remains important in delivering high‐quality audit services.